Global insight

Cargolux China will fail, say customers

CARGOLUX China will be a commercial calamity and hugely unprofitable, especially in its formative years, warn senior customers, suppliers and decision-makers in a provocative analysisby Thelma Etim.

A report passed to aircargoeye.com confirms the Luxembourg/China joint venture cannot get off the ground without US$810m in Chinese government subsidies being pumped into it.

The new B747 freighter, long-haul airline is due to be launched in 2017.

Customers are questioning the feasibility of the project’s ‘remote’ mainland China hub base at Henan – and in a shrinking, cut-price marketplace in which prices to and from Europe are already as low as 50 cents a kilo.

They also point to the burden of internal trucking costs to and from Zhengzhou Xinzheng International Airport in Henan Province. These add-on costs will surge, and render operations unviable, unless they are also continuously propped up by government subsidies, argue some key customers.

Others say the low numbers of forwarders at the hub is a big mistake since it is these forwarder consolidations and their distribution systems that ultimately drive the air cargo supply chain.

Cargolux has committed to a 35 per cent stake in the project and the main shareholder, China’s state-owned Henan Civil Aviation Development and Investment (HNCA), owns the largest at 49 per cent.

The Luxembourg airline, in a written response to aircargoeye.com, has dismissed the naysayers. “The growth of Zhengzhou in terms of available infrastructure, dedication to cargo and tonnage in 2015 clearly shows the success of Zhengzhou as a new central hub in China,” a Cargolux statement declares.

“More and more, manufacturers move into the Chinese inland and trucking costs and transit times will soon outperform the capability of the congested legacy airports,” it adds.